When I read this, I couldn't help wondering about the correlation between American savings habits and the average returns of low-risk savings accounts. I naturally assumed that periods of higher saving either coincided or immediately followed periods of higher returns.

The average interest rate on a low-risk savings instrument was 5.2 percent in May 1975 (the month American savings peaked at 14.6 percent). Since 1960, average interest rates climbed to their highest in June 1986 (19.1 percent). However, American savings remained relatively constant, hovering around 7 percent in the period between January '90 and January '92. It appears that ~19 percent APY didn't do a lot to encourage better savings habits.

The data shows I obviously afforded rate too much credit for swaying American saving habits.

P.S: what would you do for 19.1 percent return on your savings account?

Well there are several reasons for this. Job loss is one. No job, no income. No income, no savings. Primarily though, financial institutions are paying ridiculously low interest rates. Who wants to deposit , money at .25%. Additionally, even though the FDIC provides insurance of up to $250k on deposit accounts, the fact is the FDIC insures $4.7 Trillion in deposits with only $13.6 Billion in the FDIC fund. So really by default, people are being herded into the stock market for higher returns (Weighing Risk and Reward) on their money. This process began back on January 1, 1980 with the introduction of the 401k retirement accounts. This is where workers could have a portion of their wages (pre-taxed) invested towards retirement. Normally the stock market was where only the wealthy tinkered. Now through the advent of the 401k, it was open to the masses.
In my NOOKBOOK, "Think and Think Again," I talk about the free market system and how there are certain things that interfere with natural process, that then actually create a false economy. The stock market is one of those things, primarily because the stock market is not a true reflection of corporate value. The stock market today is no more than legalized gambling. How so? Think about this if you would. There have been times in recent history when the stock market should have crashed. 2007-2008 was a good example. My broker at the bank advised me back then that I should get in the market because it was at 12,500 and would be at 14,000 by year end. I explained to him something that I'm sure no one had told him before, or even thought of before. I told him that the only reason the market had not crashed was that when economy sours, most people don't invest in the stock market, other than speculators. Then the market reflects the lack of investment usually by declining.
However, because of 401k investments coming into the market every week from payroll withholdings, it continues to provide a false perception of the market. It falsely props it up. In other words mutual fund managers were buying stocks with this 401k money when normally people would not be buying stocks because of the economic conditions or poor performance. Problem is the 401k money continues to flow into the market regardless of the market or the economy. As a result of the additional stock purchases, stock prices would then increase rather than decrease as they normally would, thus creating a false economy, and the false perception of the market.
I advised the broker at that time that the real value of the market was around 6,500. The broker laughed and walked out of my office. About a week later the market began to slide and it slid all the way down to around 6,500. As long as there are 401k monies going into the market, the market will never truly crash, but there will be some very serious corrections when the markets get so unbelievably skewed due to outside influences and inside manipulation. In my book I provide some interesting solutions to this and many other significant issues within our society.
People will save money when it is worth their while to do so. What is needed is higher rates on deposits, and if I might add, more competent leadership of these financial institutions. Given the state of the financial industry, I really don't think the public has much confidence in what has to this point been incompetence in that industry. The public sees bankers as incompetent people when they write bad loans and the government has to bail them out. Bankers have created a poor perception of their abilities to be financially responsible people. Hence government intervention and public skepticism of the industry.

How do you expect demand to return if savings, and income for adequate savings, are not only way too low, have been too low for decades. Isn't disposable income and savings far, far more important than spendning to immitate demand? Shouldn't the focus be on restoring balance sheets of workers?

Why didn't we simply do a couple quarter income tax moratorium instead of government spending? Why did we have it in our stupid, little heads that we didn't want consumers to save?

"The falling saving rate is a worrying trend. A low stock of savings increases vulnerability to economic shocks."
-> You only see savings as a buffer for rainy days?? Savings is what provides the economy with funds for capital accumulation. THIS is what this is a worrying trend.

"People save more during recessions—and more then businesses care to invest, leading to underutilised resources—"
-> So you're basically saying that SMEs don't have any issue to find funding at the moment as there is a surplus of savings around... Funny it doesn't look at all like I see it out there.
(granted there are also other factors involved)

"so boosting consumption increases aggregate demand and jumps starts recovery. With saving rates already so close to zero, the government might have had better luck boosting the economy through its own dissaving, via deficit-funded stimulus, than through trying to encourage such behaviour in strapped households."
-> This is quite naive. Government has been dissaving for decades already. Stimulus don't work, or at least only provide a short-term boost (and only in terms of GDP growth thanks to the very nature of the GDP equation), especially in an economy that's plagued by both public and private overindebtedness. You can't force people to spend. Supply-side is the solution, as demonstrated by Apple and other consumer electronics firms throughout and despite the whole crisis.

Look at the stats: there's a glut of savings in the market right now, especially when you look at corporate cash. Problem is that with depressed demand, there aren't a lot of high return investments out there. Investment (capital accumulation) is down, but not for any lack of available funds.

I think you got it wrong.
You're taking a Keynesian view. But it's not the demand that makes the "high return investment". It's the right idea that makes it (supply), as my Apple example showed.

If you start propping up demand artificially, with cheap credit or anything, the only thing you do is diverting funds from possibly longer-term profitable investments to short-term ones that would be unprofitable otherwise, but which are now in demand as people suddenly get access to new money.
Eventually, all we're left with is a new debt bubble, that must be repaid back before starting reinvesting again.

That's why investment is down despite enough available funds.
Red tape, banking regulation, and regulatory regime uncertainty are other factors.

That's not an anything view; it's a statistical view. Think about Apple. They're holding on to billions in cash and can't find anything worth while to spend it on. And they wouldn't have all that money if there weren't customer demand for premium computing devices. If companies (like Apple) project weak consumer demand for the future (whether they'reselling goods or physical capital), the projected return on any productive investment is lower.

I haven't seen any data that show that "regime uncertainty" has had any movement in the past 30 years, but it could be out there.

Apple is not holding cash because it doesn't have any investment possibility. It holds cash because it generates cash a lot quicker than it generates new ideas, thanks to a massive profit margins due to excellent marketing. Not all very successful IT/electronics companies are in this situation regarding cash holdings. Still, they sell A LOT.
Weak demand has clearly not stopped Apple, its competitors, and other related firms since 2007!!

And you are contradicting yourself here:
"And they wouldn't have all that money if there weren't customer demand for premium computing devices."
Yes, and it's clearly a "supply creates its own demand" example. Supply was created ex-nihilo in this case. Good products ATTRACTED demand, not the other way round.

Regarding regulatory regime uncertainty, it only concerns the last few years.

I totally agree with your point of view. Now Americans spend money not because we need to but because it is FREE (zero % interest rate, why not.) What's the point to save while we are losing money everyday when the return can't even cover the inflation. If our government doesn't stop it's money printing machine, then it is impossible for the saving rate to go up.

Whenever data is presented about the savings rate it is never clear if this rate is based on gross income, take home pay (which is post 401K contribution) or disposable income i.e. after paying monthly bills and living expenses.Which is it in the top chart? How about avergae monthly/yearly savings accumulation?

Young workers have lower median incomes than pensioners. Why should they be saving then, at negative real interest rates and with risk of appropriation over the next decades, for that distant and more privileged retirement?
.
There's far more income in middle age to start saving (and perhaps real yields will rise above zero at some time in the next decades).
.
Without compound interest, more saving by young people would only detract from welfare.

I hope you aren't a young worker. Those who believed such things in the early 1980s ended up much worse off.

"There's far more income in middle age to start saving."

If you want a house, you have to start saving for a downpayment first. If you are married and have a child, one of you might end up out of the workforce, or you both may work part time (as my wife and I did) reducing your income for a time. Then you need to save for your children's education.

Meanwhile, if you are lucky your pay will plateau. If you are unlucky you will work in an sector where pay temporarily soars, upsize your lifestyle like your peers, and then see your pay plunge and never recover its former highs. (Oil in the early 1980s, Wall Street in the 1980s, dot.coms in the 1990s, Wall Street again in the 2000s, real estate and mortage brokers in the mid-2000s, dot.coms again since 2007, oil and gas again today). They should have banked the windfall rather than assuming it was a permanent consequence of their own genius, but they never do.

"That distant and more privileged retirement?"

For today's young workers retirement will indeed be distant, but will not be priviledge, even if they do save. Unless, as some evidence suggests, life expectancy begins to fall.

I think I probably agree with you. My comment was meant more as an observation of how individuals in society appear to be working at cross-purposes to each other.
.
That is, it's probably best for individuals that they save more. However, firms are doing their utmost to get consumers and clients to spend more, and save less.
.
And, spending more leads to more spending, which helps build the economy over time.
.
I think the best individual position to be in may be as one of those who owns a firm - through stock ownership, proprietary ownership, etc. - and yet saves to his/her utmost, and uses the savings to purchase more ownership over time, with enough savings on the side to have a cushion through the cycles.
.
So, one saves individually, and benefits from others' lack of savings. Now, whether this is moral and/or ethical is an interesting question, however...

I distrust the line because I think it's used as excuse for government to spend when people are tightening up. The people may fear for the future and save what they have while the government will open the spicket and send them over the cliff. In other words, if you fear famine, you'll save your food. Many use this as an excuse for the government to take everyone's savings and throw a banquet. This is the Economist's take- I reject it.

To be perhaps overly simplistic, those that save at the most opportune time to save, and spend at the most opportune time to spend, live the most abbundant life.

The best individual position is to own a company when it's growing, and to cash in on a company and sell it before everyone else realizes that it's not. If you can do that, you will have abundance.

On a personal level, I'm very good at saving and waiting- very bad at spending and taking advantage of a good deal when it's offered.

"I distrust the line because I think it's used as excuse for government to spend when people are tightening up."
.
Well, I think it's Keynesian 101 that gov't should spend when the economy has tanked, and then reign-in spending when the consumer has kicked back in.
.
To me it seems like intelligent policy, although I understand that not everyone is good with it, given in part that it appears to take away personal incentives to save and take responsibility for one's own life.
.
Then again, not saving helps the economy, which brings us back to square one...

"spending leads to more spending"
-
It might be more accurate to say that spending more now means spending less later. And vice versa. Current policies strongly discourage savings; the effect is a short term boost to consumption at the expense of consumption in the future. The future in that sense is an economic 'commons' for which the central planners don't seem to much care.

I should have also clarified the important difference between spending for true consumption (the instant gratification kind) versus spending for investment (in education, tools, one's health, etc.). The latter may actually increase future earnings and thus spending. But unfortunately the bulk of what's being stimulated is the former. In any event, artificially tilting the field against natural, beneficial individual time preferences is reckless and inherently detrimental to the economic well-being of the vast majority.

"It might be more accurate to say that spending more now means spending less later."
.
I believe this may be true individually - although as others have pointed out in this comments section, having less at times allows certain gov't programs to kick in which help subsidize individual college tuition, medical care, etc.
.
However, in the aggregate, I believe spending leads to more spending via the money multiplier effect.

"In any event, artificially tilting the field against natural, beneficial individual time preferences is reckless and inherently detrimental to the economic well-being of the vast majority."
.
Well, I think it's fair to differentiate between spending and investing, and one could argue that the former is in regards to non-assets, and/or depreciating assets, while the latter refers to assets likely to appreciate.
.
However, whether it's reckless for McDonald's, for example, to create incentives for folks to supersize their meal, and therefore spend more money - and at the likely individual detriment of both the consumer and society as a whole, which has to deal with it's costs - leads to all kinds of questions regarding free speech, free will, the pursuit of happiness, private property and the management thereof, etc.

Well, the multiplier effect is a mysterious thing that nobody can quite figure, at least at the aggregate level. Clearly the multiplier for tools is apt to be more than the multiplier for lap dances. But I'll grant that IF, and to the extent, revenues are reinvested into higher efficiency/productivity, there's a positive multiplier.
-
And I have no beef with McDonalds (or Whole Foods for that matter). They excel at meeting customer demand; if they didn't (unlike banks) they'd be out of business. Of course, it would be nice to have transparency as to the externalities of all businesses--especially those that fall on the consumer directly and become part of the value proposition.

The US economic system reminds me of how computer mapping of gazelles running from lions in a zig-zag pattern suggests that gazelle behavior is less about avoiding the lions, and more about placing unhealthy gazelles at the edge of the herd to be sacrificed to the lions, and to the long-run benefit of the herd.
.
So, at some point, there are certain things the US economic system is going to do in the long run, and modifying behavior to avoid being placed at a difficult position is the best individual choice.

Individual choices are subject to systemic incentives. Easy credit, unrewarding savings, manipulated equity markets. These are incentives. Now, if we re-introduced starvation and/or debtors' prison and/or more unpleasant welfare arrangements, those would be valuable incentives as well--much as the lions in the gazelle analogy. Just a shame that we're whipping the herd to a gallop as the cliff approaches.

If you have to have a budget deficit I would think an equivalent if not better Keynsian policy is for the government to cut taxes. Both responses result in budget deficits where the government spends more than it takes in.

I disagree, not saving does not help the economy when it's best to not spend. If a decisions is to spend or not to spend, and the better decision is not to spend, than that is the better decision to take. It might not be as opportune for you to spend as it is for someone else, therefore it makes sense that that person spends and therefore you should save and give your money to them. Like in sports, many times its best not to take the shot and to pass the ball off to someone else.

"Is it necessarily Keynesian 101 that gov't should spend?"
.
Yes, and during particularly strong economic downturns.
.
"If you have to have a budget deficit I would think an equivalent if not better Keynsian policy is for the government to cut taxes."
.
The returns on dollars spent, whether on a road or on a tax cut, are not the same. The returns on road building are generally much higher.
.
"It might not be as opportune for you to spend as it is for someone else, therefore it makes sense that that person spends and therefore you should save and give your money to them."
.
I agree with everything up until the "give your money to them" part. However, at some point this reaches economic metaphysics, which I'm not very good at.
.
For example, person A spends their money on lap dances, and person B on The Christian Children's Fund. Which is better? I think it depends on the person benefiting.
.
For the lap dancer, the spending by person A is better, unless he/she has a soft spot for poor children, at which point he/she might donate part of his/her earnings to the Christian Children's Fund.

What if you already have decent roads? Isn't there a level of investment in roads where further investment does not gain the same return? I love concrete, you love concrete, heck, the Romans from 2000 years ago loved concrete, but you agree that eventually you run out of things to pour concrete on? Further, most of the people who know how to build roads are already building roads, unless you plan on retraining lawyers or Economist journalists to build roads.

The value in a road is not so much the road but rather the goods that travel over them. In our society, the roads are generally public roads built with political montivations in mind. The goods are generally private sector goods produced with economical motivations in mind. I'm not discounting the value of roads but I'm emphasizing that when the economy slows, you want enhanced focus on making economic decisions, not political decisions.

Certainly there comes a point of diminishing returns on infrastructure investments. And we are probably at (or past!) that point on some kinds. But that is a long way from saying that there are not still worthwhile infrastructure investments that could be made.
.
The challenge, of course, is to get spending directed to those, rather than to whatever would be the prettiest edifice for a politician to get his name on. Heck, we would be significantly better off if we directed all of our infrastructure spending for a couple of years to catching up on "deferred maintenance." Unfortunately, there is no way for a politician to get his name posted on maintenance....

I suspect that many people have "deferred maintenance" on their private properties. I have on mine until I get the funds.

What if we took fewer dollars out of peoples' pockets so that they could do infrastructure improvements, or are public infrastructure improvements better than private ones? Perhaps public politicians are more important than private citizens? Perhaps they're more knowledgable?

I admit that I, too, have had some deferred maintenance. But it was a matter of waiting an extra 10% on things like full repainting. But I didn't simply stop doing maintenance and let things fall apart. Maybe because I was aware that, if deferred long enough, I would be looking at a far more expensive replacement instead. But that kind of "pay short term costs to avoid much larger long term costs" thinking seems in short supply in our legislatures.
.
If the public roads are full of pot holes (and they have definitely been getting that way here), then it seems like public funds ought to get spent maintaining them. At least, I don't see a way to convince any private enterprise to pay for filling them, when there is no prospect of a direct return. (If you want to propose a shift to private toll roads, that's a different discussion.)
.
Similarly with the rest of the public infrastructure we already have. If you want to try to make a convincing case for privatizing it, by all means go for it. But until and unless it happens, what we have ought to get maintained.

If you don't have the money, you don't have the money. You can want to pay short term costs all you want, if you don't have it, you don't have it. This is definitely in short supply in our legislatures.

Right now the government isn't yet bankrupt- there is money for potholes where they need to be filled in. But if you're talking stimulus, I have lots of shovel ready jobs around my house that don't require boards and buearacracy to approve, and so do many other people. Currently, as you observed, that money is being thrown at political pet projects.

To be honest, I really don't care how the roads get paid for, or if they do, if I have a leaky ceiling. The assertion that the politician's spending projects with my money always comes before my spending projects with my money is garbage. It's my bloody money, not theirs. They don't have any until they take it from us.

The government, in constructing a safety net, has made it unnecessary if not imprudent, to save. Saving for college means that your student qualifies for less financial aid. Saving for long term disability means that the nursing home gets all of your wealth before you qualify for Medicare. Saving for retirement means that your social security benefits will be subject to income tax. And forgoing current consumption (with zero financing on a new car) to save at a 1% return (about minus 1% in real terms) is obviously irrational.
Plus the economy would collapse if we didn't 'Spend, spend, spend!'

Exactly. Who among us can wait for the luxury of Medicaid-provided nursing care? Why even earn income if some of it will be taxed? Why not just assume that your kids will get into the best possible school with full financial aid?

I think the smarter way to play the game is to save, and to invest the savings in those firms which are most efficient at capturing disposal income cash flows.
.
This may include nursing homes as you cited above, plus companies which are key to many of our lives, e.a., energy firms (Exxon, etc.) and those with strong ROEs, like Apple.

As the government grows larger and the private sector shrinks relatively, the smarter way to play the game is spend money on those activities that gain you the most political connections. For this reason people are willing to spend a fortune to get their kids into Harvard or Yale- not to learn anything, but to make connections with people who have parents in government and will be in government so when government divides the spoils, they'll have access to the decision makers within government.

"For this reason people are willing to spend a fortune to get their kids into Harvard or Yale- not to learn anything, but to make connections with people who have parents in government..."
.
Do you know anyone who has actually done this? Do government workers generally make the kinds of salaries that can pay for a Harvard tuition?
.
With all apologies, it sounds a bit like a Rush Limbough conspiracy theory...

I almost don't even understand the question- does being an alumnus of an institution bestow privleges or open doors for you by the connections you make there??? yes.

Have all the recent presidents and supreme court justices been alumni of the ivy league schools??? yes.

Being that the most powerful positions in society are occupied by alumni of the ivy leagues, in order to be within that group of power, is it not beneficial to be an alumnus as well??? yes.

Do powerful politicians manage to get their children into the ivy leagues despite their academic achievement for the obvious benefit of the certification??? yes

I believe it's a conclusion that it based on solid observations. I don't live in that world but it doesn't mean that I don't observe it. I'm not a Kennedy but I think we all know the privleges one has for being a Kennedy- you literally get away with murder.

No, you're right, government workers don't game the system or use their contacts to garner special privleges. Politicians especially don't do any of this.

For example, you would agree that GW Bush made his way into Yale on his own merits? And you would agree that the folks that GW Bush met at Yale didn't open other doors for him that would be unavailabe if he had not made it into Yale, on his own merits?

You would also agree that somebody like President Obama, who has never had to release his transcripts or justify why people think he's intelligent, can be trusted to be intelligent purely based on the institutions that he attended? Further, there's no question how he got into Harvard by the very rare path that he took through Occidental, being a self-professed stoner...

No, they didn't go to those institutions for special privleges and nobody helped get them there and, even though they both went government, that was accidental as both men were just as motivated for the private sector...

I'm not in the political world and my family does not have those contacts. More local to my life, having served in the military, I do know generals and admirals who have used their contacts to get their children into the military academies with less than stellar academic records to give them a head start in a military career. I count that as gaming the system- what say you?

Yep. Decades of unfettered fiscal and monetary 'management' have pretty much strip-mined the country's private wealth. Arguably it has wasted quite a bit of the public wealth as well; to wit our multi-trillion dollar deferred maintenance on critical infrastructure. The Founders would be apalled, and request their images removed from our currency. Suitable replacements would be Woodrow Wilson, Richard Nixon, Arthur Burns, Hank Paulson. Alexander Hamilton can stay, of course.

While I personally wouldn't want to pull from my 401(k) unless I really needed the extra cash flow, the 401(k) loan could be viewed as a diversification strategy for the portfolio. By temporarily removing that portion of your savings from the account, you are shielding it from current loses in the market and (depending on your creditworthiness to yourself) guaranteeing a specific rate of return for the loaned amount upon repayment. I believe my 401(k) demands an interest rate of 5 or 6%, which obviously is currently better than any of your typical non-equity options.

The Fed paper referenced in the article says that even a loan from a traditional 401(k) can be argued to not be hit by double taxation due to the after tax repayments being spread across 5 years. I'm still wrapping my head around that explanation, but agree that a Roth 401(k) would avoid the tax issues entirely.

I have a suggestion. Try to coordinate your advice that people need to save more for retirement with the public policy idea that government old age benefits should be means tested.

Those advocating the policy, both Democrats and Republicans, do not use lifetime income as the measure of "means." They base it on how much is left after lifetime spending. Those who lived large will get public benefits in old age to provide a standard of living equal to those who scrimped and saved, according to the plan.

Try to coordinate the fall in the U.S. savings rate with public policies of the past. The elimination of tax deductions for borrowing (except mortgages) and the creation of all kinds of tax subsidies for saving (IRAs, 401Ks, 529s) starting in the early 1980s. All intended to increase the savings rate. Clearly this did not work, except to redistribute income upward.

Culture matters more. America's cultural leaders, in the advertizing industry, continually work to upsize the amoung of consumer buying that must occur for a decent Americna life to be lived. With politicians joining in, because it is good for the economy, and the media joining in, because "news" stories on spending attract advertizers.

That's actually the best argument I've ever heard against means testing. If you instead just have a flat retirement benefit, then there's no disincentive to save. People you live large (or are poor or unlucky) have to live at the minimum, while savers get to supplement the minimum with their savings. Comes down to an empirical question of whether means testing actually reduces lifetime savings or not, which I doubt, but have no idea if it's true or not.

"If you haven't noticed, the government is running trillion dollar deficits and needs cash..."
.
Given that it's inflating away the deficit at 2% a year, it may not need the cash.
.
Theoretically anyway, within 36 years any gov't debt incurred today will have been inflated away to zero.

The banks just need to ensure that they have a positive ROE in their business activities.
.
I believe that Chase, for example, has an ROE of about 8% at present, while Apple approaches 50%. One could argue that Apple is the much better business.
.
However, any business which garners a consistently positive NPV is worth investing in, at least in theory.

"Last I recall, we live in a constitutional republic."
.
A constitutional republic is a form of democracy.
.
"Democracy is just another word for tyranney by the mob."
.
What form of gov't would you prefer other than a democracy?

Everybody knows that the ideal form of government is a benign dictatorship. Perhaps the better question for McG is how he intends to assure that the dictator that we get is benign. Somehow that is the point where "it happens by magic!" always seems to enter into the discussion.

The private market is being quite rational in terms of paying market returns. My gripe is that there is a juggernaut in the market that can conjure money and is offering borrowers (e.g. banks) a better deal than any rational investor would.

Macro-theory draws a long-term correlation between savings and investments, system-wide - but is that relevant today? With the Fed creating $85-billion of new money a month via QE, all of the nation's investment requirements could be met with those QE funds alone, and with no private savings at all.

You do make a wonderful point - spending that QE money on public investment projects that increase the potential output of the system would be a great idea, from every angle - but one. You're so politically naive it almost hurts to read the piece - those who make the decisions have decided it's much better (for them personally) to spend QE money buying Wall Street of its MBS-mistakes than 'wasting it' on bricks and mortar and things of that sort that do nothing for the folks on The Street. Gotta not lose sight of who matters, guy - and who doesn't.

If the time ever comes when QE ends and private savings are needed to fund investments (like how big is that 'if', and what kind of disasters must happen to bring it about - the mind can't ...) rates will rise and more savings will follow.

Right about the cash - there's so much of it out-'n-about now that there's literally no place to put it. Using the QE$ to fund Treasuries dedicated to infrastructure would have been such a nice, elegant solution - for everyone but the wise guys.

The worst part is that while the infrastructure bank remains a good idea, every year that Congress waits and delays its spending is a year that the costs go up. Spending will never be cheaper than it has been for the past 5 years.

Meanwhile, the average retirement account balance for people between 55 and 64 is $291,000, which will only provide about $12,000 a year in inflation-indexed income.
Toss in the $12,000/yr for Social Security and they are up to $24k/yr.
About a $10/hr wage (with fewer taxes taken out).
NPWFTL
Regards

Meanwhile, the average retirement account balance for people between 55 and 64 is $291,000, which will only provide about $12,000 a year in inflation-indexed income.
.
Of course that $12k/yr is taxable income, so the more you save now the more you'll pay in taxes later.

And if you save and draw out too much, then Social Security benefits become taxable (50% or 85% of what you get from SS is added to the retirement account taxable income).